CFPB Releases Report on Companies That Process School Meal Payments

The CFPB recently released a report on payment processing companies that manage school meal payments for school districts. According to the report, the companies operate in a captive market and often charge transaction fees that disproportionately impact low-income families. According to the Bureau, the report is intended to help school districts avoid contracts with companies that allegedly charge families excessive fees to process their school meal payments.

The report, based on an analysis of the 300 largest public school districts, highlights several key concerns:

• Lack of choice for families. Payment processor contracts are set at the school district level, leaving families without the ability to choose their payment platform. This lack of choice makes it difficult for families to avoid harmful practices and potential violations of consumer protection laws.
• Insufficient access to free optionsMany school districts and processors fail to properly promote or offer free payment methods. Furthermore, the free options available are often more cumbersome than electronic alternatives.
• Financial burden for low-income familiesFixed transaction fees can disproportionately impact families who make small payments regularly, which can add up to significant costs over the course of the school year.
• Limited competition between payment processorsThe report points out that a small number of companies dominate the market, leading to a lack of competition and fewer incentives for school districts to negotiate lower rates.

While schools participating in the National School Lunch Program are required to offer free payment options, the report notes that these options are often poorly advertised or inaccessible. This lack of accessibility forces families to pay more in fees than necessary.

Put into practise: The CFPB’s report aligns with the Bureau’s broader efforts to address digital payment platform practices that it deems harmful to consumers (previously discussed here , here , and here ). Payment processors for school meal programs should review the report, as the Bureau’s reporting can often be a precursor to regulatory action.

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